What does annulment of a bankruptcy mean?
Annulment of a bankruptcy is essentially a order from the Court which cancels the bankruptcy order and puts the debtor back into the position they would have been in had the order not have been made.
In what circumstances will a bankruptcy order be cancelled / annulled?
An application can be made to Court on the grounds which are specified in section 282 and section 261 of the Insolvency Act 1986, and a successful application to annul a bankruptcy demonstrates either:
- that on the grounds that exist at the time the bankruptcy order was made the order ought not have been made (see below for more information on the grounds that can be presented); or
- that the bankruptcy debts and expenses that have accrued during the bankruptcy have since the making of the bankruptcy order have been paid or secured to the satisfaction of the court (for example by solicitor’s undertaking); or
- an undischarged debtor has made an Individual Voluntary Arrangement with the creditor(s) in satisfaction of the bankruptcy debt.
However, it must be noted that case law demonstrates that the Court’s power to annul a bankruptcy order under section 282 is entirely discretionary and just because one of the grounds above exists, does not mean that the Court will automatically cancel a bankruptcy (see Gill v Quinn  EWHC 883 (Ch)). Nonetheless, the court is required to automatically cancel a bankruptcy where the bankrupt has entered into an Individual Voluntary Arrangement (pursuant to section 261).
What is the procedure to cancel / annul a bankruptcy order?
It is important to seek the guidance of a solicitor familiar with the Insolvency Rules and the minutiae of the bankruptcy procedure to avoid failure risk. Generally, many solicitors do not understand the insolvency process and how to apply the bankruptcy rules to maximise the benefit to their clients. It will be detrimental to your case if you attempt to annul a bankruptcy yourself or instruct a solicitor with little to no experience of the bankruptcy procedure.
The process to follow to cancel a bankruptcy order depends on the grounds on which the bankrupt relies on to annul the bankruptcy.
The procedure to follow to annul your bankruptcy
- Fill in Form IAA (and pay the application fee): you can download a word version template Form IAA here. Guidance notes can be found here. It is important to seek legal advice when completing Form IAA because all relevant information must be included. You must also notify the Court if you want details of the bankruptcy removed from the Land Charges Register.
- Draft a Witness Statement: Depending on the facts of your case, a witness statement can be submitted to the Court in support of the application stating that all debts have been paid along with supporting documentary evidence. Legal advice should be sought when drafting the witness statement, guidance notes on the Civil Procedure Rules states that a witness statement must:
- start with the name of the case and the claim number;
- state the full name and address of the witness;
- set out the witness’s evidence clearly in numbered paragraphs on numbered pages;
- end with this paragraph: “I believe that the facts stated in this witness statement are true.” and
- be signed by the witness and dated.
3. File the application and witness statement at Court: the Court will then send a notice of hearing setting out the date, time and location of the hearing to cancel the bankruptcy order.
4. Notify the Official Receiver: the bankrupt (or their legal representative) must liaise with the bankrupt’s Official Receiver and send them a copy of the application and witness statement. The Official Receiver must also be notified at least 28 days before the hearing. You will still be required to attend your interview with the Official Receiver if this has been scheduled.
5. Receive a report from the Official Receiver: the Official Receiver (OR) is required to produce a report 21 days before the annulment hearing which sets out a summary of the bankrupt’s assets and liabilities; any creditors of the debtor known to the OR; and whether the OR and/or trustee supports the bankrupt’s application to annul / cancel the bankruptcy.
6. Attend the Annulment Hearing: we provide representation at any bankruptcy hearing on your behalf. The Court will look at the grounds submitted by you requesting that the bankruptcy be annulled, it will also take into account whether the Official Receiver has any objections to the annulment application. The Court will also decide at this hearing who would bear the costs of the bankruptcy order and the annulment hearing.
Examples of cases where a bankruptcy order has been cancelled / annulled
The two main grounds for cancelling a bankruptcy are:
- annulling a bankruptcy which ought not have been made; and
- annulling a bankruptcy on grounds that all debts and expenses have been secured or paid.
The Court applied the same tests for setting aside a statutory demand and for deciding whether to annul a bankruptcy order. The judiciary are granted a wide discretion when it comes to deciding whether to cancel a bankruptcy petition.
Recent case law suggests that the Court follows the 3 stage test set out in JSC Bank of Moscow v Kekhman and others  EWHC 396 (Ch), namely (i) it considers the grounds that existed at the time the order was given by the court at the bankruptcy petition hearing; (ii) whether or not on the grounds in (i) the bankruptcy order should have been made or not; and (iii) if (ii) is satisfied, the Court then has the wide discretion to determine whether it will exercise its’ judicial discretion to cancel / annul the bankruptcy order that had been made.
Cancelling / annulling a bankruptcy order that ought not have been made
- Any procedural irregularity;
- breach of justice e.g. where the debtor did not attend the bankruptcy petition hearing as they were misled to believe that the hearing would be adjourned (see Hope v Premierpace Ltd  BPIR 695);
- when the bankruptcy petition debt could have been disputed by the debtor; or
- where the court that heard the bankruptcy petition and provided the sealed bankruptcy order did not have jurisdiction to make the bankruptcy order (see Raiffeisenlandesbank Oberösterreich AG v Meyden  EWHC 414 (Ch)).
Get your Bankruptcy Cancelled: Instruct Specialist Bankruptcy Annulment Solicitors
We are a specialist City of London law firm made up of Solicitors & Barristers operating from the only law firm based in the Middle Temple Inns of Court adjacent to the Royal Courts of Justice. Generally many solicitors are unfamiliar with the Insolvency Rules and the minutiae of the bankruptcy process, we are experts in dealing with matters surrounding individual insolvency. Our team have unparalleled experience at cancelling bankruptcy orders, liaising with the Official Receiver, providing a solicitor’s undertaking, representing you at any bankruptcy hearing at the Bankruptcy Court, at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.